An Oregon bill that would restrict the use of independent contractors has drawn opposition from the Bend Chamber of Commerce and others who fear it will squelch startup activity and limit opportunities for people to work remotely.

Proponents say House Bill 2498 would prevent businesses from shifting costs and risks onto workers who are in practice employees, and gaining an unfair competitive advantage. Proponents note that Oregon loses out on payroll tax revenue and unemployment insurance assessments when employers treat workers as contractors, rather than regular employees. Contractors aren’t entitled to paid sick leave, and they are responsible for paying taxes, which includes the full Social Security income tax.

“I get the reason they are trying to protect people who are seeking full-time work,” said Katy Brooks, CEO of the Bend Chamber of Commerce. She submitted written testimony opposing the bill, which had a hearing earlier this month before the House Committee on Rules. “It’s about Bend and Central Oregon,” she said. “There is a business ecosystem here that relies on the ability to contract out.”

That system benefits people who live in Bend but find work with companies outside the region, as well as local startups, Brooks said. The chamber is most concerned with the bill’s key provision, which says independent contractors “do not provide services that are within the usual course of the other person’s business.”

Oregon’s existing definition of independent contractors says they must be free from direction and control over the means and manner of providing services. They must be customarily engaged in an independently established business.

Sponsored by Rules Committee Chairman Paul Holvey, D-Eugene, the bill is supported by labor unions for truck drivers, carpenters and service workers.

“Being 1099’d,” said Matt Swanson, political director for the Pacific Northwest Council of Carpenters, referring to the tax form for independent contractors. “It’s a common phrase we hear from construction workers.”

Holvey did not respond to requests for comment, but Swanson said the bill is likely to see revisions. Policy bills have until March 29 to be scheduled for committee vote, or they won’t advance.

“There’s a lot of interests at play, and they’re trying to get it right,” Swanson said.

Business interests including the Technology Association of Oregon and Oregon Trucking Association weren’t the only opponents.

Bend resident Cynthia King wrote in an email to the House committee that her status as an independent contractor gives her the flexibility to care for her son. “I do not need to ask a boss if I can leave to take my son to the doctor or appointment; I AM MY OWN BOSS. I create my schedule to allow this common-sense flexibility that works for me, and it works for thousands of other independent contractors such as myself.”

Rebecca Smith, director of work structures for the National Employment Law Project, a nonprofit worker advocacy group, disputed the notion that hiring people as employees takes away flexibility.

“Flexibility doesn’t have anything to do with the legal definition of an employee or independent contractor,” she said. “Businesses choose to offer flexibility.”

Smith testified in favor of the Oregon bill. A few other states — New Jersey, Massachusetts and Vermont — have adopted the same strict definition of independent contractor, she said.

California could be added to the list.

The California Supreme Court made a high-profile decision last spring in the case of Dynamex Operations West Inc., a courier service that had reclassified its drivers as independent contractors.

The court set up a three-part test to determine independent contractor status. One of the three questions is whether the work is outside the hiring entity’s usual course of business. If the answer is no, the worker should be treated as an employee.

The three-part test could protect people such as janitors, home care workers and delivery drivers, who are increasingly being treated as contractors, Smith said.

— Reporter: 541-617-7860, kmclaughlin@bendbulletin.com

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